Uttendorf, Salzburg, Austria

NOTE: To Stowe Reporter readers who had been told today’s post would be about some interesting new health studies: that can wait until Monday. The following should not.

Let’s stipulate at the outset that the folks at the Burton Snowboard company know their business, and if they say they can make snowboards cheaper in Austria than in Vermont, then by gum, they probably can.

Aside from that, the entire discussion about Burton’s decision to move its manufacturing operations from Chittenden County to Uttendorf, Salzburg State, Austria, has been drivel.

Political drivel and economic drivel, all driven (or perhaps drivelled?) by the same pre- or mis-conceptions.

All described by news media who acted the part of clueless doofuses who believed everything they were told, and even a few things they were not.

To begin, with, the story was grossly overblown. The move will cost 43 jobs. That’s 43 of more than 335,000 employed Vermonters, or slightly more than one hundredth of one percent of all workers. Neither the pontificating politicians nor the credulous correspondents even know whether they’re particularly good jobs because Burton isn’t saying how much the production workers earn.

Yes, Burton is an “iconic” (could we possibly retire that word?) Vermont company; if snowboarding wasn’t exactly born in the state, it at least came of age here.

But…the company isn’t moving. Its headquarters and almost all its non-production operations are staying right in Burlington, and even, it seems, expanding. Yet WCAX-TV (Channel 3) opened its Wednesday evening broadcast asking whether Burton’s move raised the question: “Is Vermont business-friendly?”

Well, it’s the default position question, isn’t it? So everybody, starting with Gov. Jim Douglas and his minions, jumped on it with the conventional assumptions.

Which were only about 180  degrees off.

The conventional assumptions are that when a business moves anything out of Vermont, it must be because Vermont is “anti-business.” It taxes the rich. It imposes mandates on companies. It coddles the workers.

Compared with Austria?

Hello, everybody. Austria is in Central Europe. It has many attractions: a highly skilled and industrious work force, Alps, Vienna, schnitzel. But it is decidedly not a place to go to save money. Like the rest of Central (and Western) Europe, Austria is prosperous and expensive.

Not as expensive as Germany, Sweden, or France. But it’s not as if Burton was moving some work to Nicaragua, or South Carolina, where the social safety net is weaker. In Austria, it’s stronger.

You’d-a-thunk someone would have noticed that and raised some questions.

Does anybody still raise questions?

The Governor, to his credit, was somewhat restrained, recognizing that manufacturing is in trouble all over America. Still, he had to throw in that Vermont has “some costs that are particularly troubling to manufacturers,” including taxes and health care.

Others jumped on the bandwagon, apparently (and, as it turned out, accurately) confident that no one would question their premises. David Mace, the spokesman for the Agency of Commerce, told the Rutland Herald that Burton’s move showed that the state has to reduce taxes and  “burdensome regulations.” Tayt Brooks, Commissioner of the Department of Housing, Economic and Community Development, said he hoped the Burton move “serves as a wake-up call to the Legislature…I mean we have bills…mandating paid sick leave…that really send a wrong message to businesses out there in the state.”

In other words, if Vermont adopts mandated paid sick leave (which it will not, at least not now), more businesses might move some of their operations to…well, obviously to Austria.

Where they have mandated sick leave, paid for by the employer at first, then by the Social Security system, said Wolfgang Renezeder of the Austrian Embassy in Washington.

(Note to Vermont reporters: Almost every country has an embassy in Washington. They are all in the phone book. Almost every one has a press attaché, most of them probably as helpful and courteous as Wolfgang Renezeder. Also, for information about economic conditions in other countries, there’s this thing called the Internet…)

Usually, when a business (or even a person) moves (or, as in this case, kind of moves) elsewhere, the immediate response is to argue that Vermont has to become more like the elsewhere.

Let’s examine that. To become more like Austria, Vermont needs:

(1)  Higher taxes;

(2)  stronger labor unions, probably meaning higher wages;

(3)  Five weeks of paid vacation for almost everyone, said Renezeder, because “unions play a very important role in our economy and we do have very strong social rights;”

(4)   An energy system that gets almost two thirds of its electricity from hydropower, wind, solar, and biomass, and none at all from nuclear reactors, which are against the law for generating electricity.

(Austria had a nuclear power plant once but shut it down   after a nationwide referendum back in the 1970s.)

Does anybody else get the feeling that the above does not describe Utopia as defined by Jim Douglas and associates?

None of which means it won’t be good business for Burton to consolidate its production in Austria. It isn’t unheard of for European countries (like American states) to offer subsidies, incentives, or bribes as they are sometimes known, to convince businesspeople to expand.

Burton officials did not respond to a request for explanation, and a call to the home of CEO Laruent Potdevin was not returned.

So we’re into conjecture here. The population density of Salzburg State, where Burton’s plant is located in the city of Uttendorf, is smaller than Chittenden County’s, meaning land prices might be lower.  But probably not much lower; it’s a ski resort area. Property taxes could be lower, too, because in general European countries have minimal local taxes.

But that elaborate Social Security system, the one that finances health care, pensions, and sick pay, costs employers up to 21.9 percent of each worker’s salary (and up to 18.2 percent from the worker), far higher than U.S. payroll taxes. Renezeder said the tax is progressive, “the more you earn, the more you pay,” unlike the flat rate in the U.S.

It’s always possible that Burton has worked out some kind of tax preference deal. But considering that, in the aggregate. Austrians pay one third more of their Gross Domestic Product in taxes than do Americans (this according to the Organization of Economic Cooperation and Development) it’s hard to see how any person or business could move from here to there and not have a higher tax bill.

Or, probably, a higher wage bill. Even if Burton’s Austrian employees are not unionized, most other production workers in the area probably are, which would keep wages on the high side.

From the company’s perspective, though, the workers might be worth it. Some of those Austrian taxes support an elaborate and apparently effective network of vocational schools. It’s a four-year course,  Renezeder said, and the graduates emerge “very qualified, very productive.”

If that’s true, there may be a lesson for Vermont here: Improve vocational education. But unless Vermont wants to transform itself into America’s leading social democracy/welfare state, that’s the only lesson.

Except maybe that reporters should ask questions.

For reasons too complicated to explain (and not worth it; no juicy scandal, alas), the News Guy will not post today.

Tune in Friday for an examination of how and where Vermonters are (or, in some cases are not) healthy.

And for those who care, Erin go Bragh

Flag of Delaware

Will Vermont become the first non-Delaware?

If so, will the designation inspire progress and economic development?

Or will it just convince more people that Vermont is kind of weird?

Having no seacoast and plenty of mountains, Vermont is enough un-like Delaware without taking further steps. The further step under consideration by the Legislature has nothing to do with nature and everything to do with corporate law.

Delaware’s, according to Delaware’s Division of Corporations, offer “a complete package of incorporations services.” Because its laws protect corporate directors and corporate discretion more than most other states, Delaware is a “corporate haven,” where more than half of all publically held corporations, and 63 percent of the Fortune 500 companies, are chartered. As in every other state (including Vermont), but more so, Delaware law assumes that corporations exist to earn profit and enrich shareholders.

That’s it. Nothing else. Individual corporate executives and officers may have all sorts of other values – social, economic, environmental, or charitable. But they are to pursue those on their own time. At work, their only job is to maximize profit and raise the price of their company’s stock.

Senate Bill 263, which was approved Friday by the Committee on Economic Development, Housing and General Affairs would make an exception, and by so doing might just disrupt hundreds of years of corporate law and corporate culture.

The law would empower domestic corporations to charter themselves as “for benefit” corporations. They, too, would exist to earn profits and enrich shareholders.

But that would not be it. There could be something else. These corporations would be empowered to put right into their charters that among their purposes – just as central to their existence as profit – was…something else: the prosperity of the company’s home town; sustainable, organically grown agriculture; reducing greenhouse gasses; protecting the health of employees, or, more ambitiously, of the whole world.

According to Vermont Businesses for Social Responsibility, the driving force behind the bill, writing this option into law could have extensive consequences. It would mean, said the organization, that the “fiduciary duties” of corporate directors could “include non-financial interests.”

Translated into English, that means that if a big corporation wanted to buy out a smaller, profitable, company that was pursuing some social mission as well as profit, the directors of the smaller company could refuse on the grounds that the big boys wouldn’t keep faith with the social mission.

They can’t do that now. If Big Boy Corp. offers a stock price substantially higher than Nice Guy Corp. shares are now getting on the market, the Nice Guy directors have to sell. Otherwise, shareholders could sue. After all, to them the shares are just…shares, worth what they are worth as money. Nothing more.

But if S. 263 becomes law, said Will Patten, the executive director of Vermont Businesses for Social Responsibility, a “board of directors could say, it is our position that selling is not in the best interest of employers in our town, or family farms” or whatever public benefit was specified in the corporation’s charter, and shareholder suits would be much less likely. The company could stay independent, local, and active in the causes it has chosen.

Could it be, then, that if such a law had been in place 10 years ago, Ben & Jerry’s might still be an independent company, possibly even run by Ben Cohen and Jerry Greenfield, instead of a wholly owned subsidiary of the Dutch-based corporate giant Unilever?

Yes, according to Patten, who was a high-ranking executive at Ben & Jerry’s, and even more authoritatively, according to Cohen, who was interviewed by National Public Radio last week.
“The laws required the board of directors of Ben & Jerry’s to take an offer, to sell the company despite the fact that they did not want to sell the company,” Cohen told NPR. “But the laws required them to sell the company to an entity that was offering an amount of money far in excess of what the stock was currently trading at.”

Had the directors resisted, Cohen said, individual board members could have been sued, and they worried that they could end up being personally responsible for the legal fees.

Patten acknowledged that the bill could not totally prevent outside takeovers of “for benefit corporations. Some kind of “shareholder revolt” would still be possible, he said, but “the beauty of this bill is that…the corporate charter puts it right out front that you need to know what our values are. This will screen those investors. They’ll know the purpose of the corporation from the start.”

Under the bill, no company would have to become a “for benefit” corporation, and probably most would not. It wouldn’t be all that easy. A company would have to appoint one director to monitor its compliance with the terms of its charter, and operate with more transparency than conventional firms.

So far, nobody seems to be opposed to the bill, and several Vermont companies – including King Arthur Flour, Gardener’s Supply, Seventh Generation, and Main Street Landing — support it, according to the VBSR.

Vermont is not the only state considering the “for benefit’ corporation idea. The NPR program was about the effort in California, and Patten said Delaware’s neighbor, Maryland, was also in the running. But Patten was hopeful Vermont would win the race.

“This is the state where it belongs,” he said.

There’s nothing new about socially conscious businesspeople, or neither Carnegie Libraries nor the Ford Foundation would exist. There isn’t even anything all that new about the socially conscious company. It’s just that until now nobody seems to have thought of a legal mechanism to try to keep those companies socially conscious if a bigger, more conventional firm wants to absorb them.

But it was probably just a matter of time, especially in a society that (despite the temporary interruption of the Recession) keeps getting richer. As wealth becomes more customary, wealth alone becomes less satisfying. The businesspeople behind S. 263 are all in favor of making money. In fact, Patten said, he and his allies want to “prove you make more money by investing in social and natural capital. We’re not saying, ‘follow us and put up with less money.’”

The message seems to be, ‘follow us for more money, but also more than money.” Their hope is that the result will be more businesses and more jobs.

As it may be. Or it may be more ridicule.

Or both.